Category Archives: Compensation

Modernizing the Federal Government: Paying for Performance

Source: RAND Corporation

Enhancing the performance of the civil service has been a central objective of the United States since the Civil Service Reform Act of 1978 authorized a performance-based component to federal salary structures. In 2003, the National Commission on the Public Service, also known as the Volcker Commission, recommended that explicit pay-for-performance (PFP) systems be adopted more broadly throughout the federal government. The authors compare several proposals aimed at enhancing the role of PFP in the federal government: a White House proposal (the Working for America Act), which recommends that the entire federal workforce be converted to PFP systems by 2010; and three bills in the 110th Congress. This occasional paper examines the advantages and pitfalls of explicit PFP schemes compared with the largely seniority-based salary system that still covers more than half of federal civil servants. The authors consider why using PFP in the public sector is challenging, what can be learned from the social science literature, recent practical experience, and growing congressional opposition to PFP.

Summary (PDF; 115 KB)
Full Document (PDF; 350 KB)
See also: Policy Insight, Volume 1, Issue 6, December 2007 — Pay for Performance

National Compensation Survey: Occupational Earnings in the United States, 2006

Source: Bureau of Labor Statistics

The National Compensation Survey (NCS) provides comprehensive measures of occupational earnings, compensation cost trends, benefit incidence, and detailed benefit provisions. This bulletin presents estimates of occupational pay for the nation. These national estimates originate from the NCS locality survey data and are weighted to represent the nation as a whole. Data for more than one-half of the 152 individual NCS localities used for national estimates have been previously published.

More Money–Less Money: Factors Associated with the Highest and Lowest Social Work Salaries

Source: National Association of Social Workers, 2007

As with any profession, there are a number of factors that are commonly associated with higher earnings. The study found that social work salaries were highly variable.

This report highlights the role of salary in retaining professional workers, particularly newer workers. Of particular concern is the relationship between low salaries and agencies that are likely to provide services to the most vulnerable clients– underscoring a long-held belief that social workers’ salaries are closely linked to the societal value placed on their clients. Competitive and fair salaries are the first step to assuring that a competent social work workforce is going to be available to meet the needs of agencies and their clients in the coming decades.

Wages And Bonuses In Investment Banking

Source: Bureau of Labor Statistics, Issues in Labor Statistics, Summary 07-07, August 2007

For people working in investment banking, especially those in and around Wall Street, it’s hard to deny that late 2005 and early 2006 was very, very good to them. With steady employment totals, very handsome bonuses being handed out in fourth quarter 2005, and even larger ones awarded in first quarter 2006, it would seem to be an understatement to say that investment banking was thriving. In first quarter 2006, private sector investment banking and securities dealing recorded average weekly wages of $8,367, well above that of any industry with the exception of the other Wall Street bonus giant, securities brokerage. The investment banking industry’s quarterly total wages ranged from $6 billion to $18.9 billion in late 2005 and early 2006 and the industry’s average weekly wage was nearly 10 times the national average.

Within this industry a small number of counties accounted for a large proportion of the wages. Five counties were responsible for 71.8 percent of total wages in investment banking during the first quarter of 2006. Fairfield, Connecticut, New York, San Francisco, Los Angeles, and Cook County, Illinois, combined for wages of $13.5 billion from January through March 2006. During this time, 38.3 percent of March employment in investment banking was within these five counties.

State-Employee Salaries Rise But Still Behind Private Sector: Advance Likely Reflects Better Finances After Years of Cutbacks

Source: PA Times, Vol. 30 no. 9, September, 2007

Salaries for state-employed professionals registered modest to health increases from 2006 to 2007, although most state employees still earn far less than their private sector counterparts, according to the 2007 AFT Public Employees Compensation Survey, the only national survey that tracks such trends. The median increase in average salaries across the 45 jobs surveyed was 5.7 percent from 2006 to 2007, the highest increase recorded in the last five years, the AFT study shows. … Across all 45 occupations, the collective-bargaining advantage averages about 14 percent.

Occupational Pay Comparisons Among Metropolitan Areas, 2006

Source: U.S. Bureau of Labor Statistics, USDL 07-1455, September 26, 2007

Average pay in the San Francisco metropolitan area was 19 percent above the national average in 2006, the highest among the 78 metropolitan areas studied by the National Compensation Survey (NCS), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. In contrast, pay was lowest in the Brownsville, Texas metropolitan area with a pay relative of 78, meaning Brownsville workers earned an average of 78 cents for every dollar earned by workers nationwide. Using data from the NCS, pay relatives-a means of assessing pay differences-are available for each of the 9 major occupational groups within 78 metropolitan areas, as well as averaged across all occupations for each area.

The Wage Impact of Trade Unions in the UK Public and Private Sectors

Source: David G. Blanchflower and Alex Bryson, Institute for the Study of Labor, IZA DP No. 3055, September 2007

This paper draws attention to an increase in the size of the union membership wage premium in the UK public sector relative to the private sector. We find the public sector membership wage premium is approximately double that in the private sector controlling for a full range of individual, job and workplace characteristics. Using data from the Labour Force Surveys of 1993-2006 the gap between the membership premium in the public and private sectors closes with the addition of three digit occupational controls, although significant wage premia remain in both sectors.

However, using data from the Workplace Employment Relations Survey of 2004, the public sector union membership wage premium remains roughly twice the size of the private sector membership premium having accounted for workplace fixed effects, workers’ occupations, their job characteristics, qualifications and worker demographics. Furthermore, the membership wage premium among workers covered by collective bargaining is only apparent in the public sector.

Looking at the each state’s pay for its governor and coaches

Source: Kansas City Star, August 26, 2007
(subscription required)

Alaska is the only state that pays its governor more money than its highest-paid coach. Of course, Alaska doesn’t have college football.

In most states, the top-ranking official is paid significantly less. Here is a list of each state’s governor and his or her salary (GOV), the highest-paid coach from a state-funded school (HPC) and the highest-paid football coach (HPFC), if he’s not his state’s highest-paid coach overall.

States Venture Into Teacher Performance Pay

Source: Pauline Vu,, October 09, 2007

The controversial idea of paying teachers based not on how long they’ve been teaching but on how much their students learn got a boost when a key congressman recently proposed adding pay-for-performance money for teachers in high-poverty schools to the next version of the federal No Child Left Behind education law.

Retracting a Gift: How Does Employee Effort Respond to Wage Reductions?

Source: Darin Lee, Nicholas G. Rupp, Journal of Labor Economics, Volume 25, Number 4, October 2007
(subscription required)

Since the days of Henry Ford, employers have argued that higher pay induces employees to provide additional effort. While the converse is also thought to be true, there is little empirical evidence testing this hypothesis. Not only are significant company-wide pay cuts rarely observed in practice but measures of employee effort are typically difficult to quantify. This article examines the effort responses of U.S. commercial airline pilots following a recent series of large, permanent pay cuts. Using airline on-time performance as proxy for unobservable pilot effort, we find only limited support for the hypothesis that pay cuts lower employee effort.